September market update and investment risks

The following reflects the general views of our Treasury & Investment Office (T&IO) and should not be taken as a recommendation or advice as how any specific market is likely to perform.

These views are as at the end of September 2025.

The value of investments can go down as well as up. Investors could get back less than they put in.

Please remember that past performance is not a reliable indication of the future performance.

Overview

The potential impact of US trade tariffs on the global economy was a dominant theme. However, there was little evidence of a tariff effect on economic data, as global growth remained broadly resilient. Data released in September showed the US economy expanded 3.8%, year-on-year, in the second quarter, supported by robust consumer spending. This positive picture was clouded by a slowdown in the jobs market. Non-farm payrolls data showed that the US economy added 22,000 jobs in August, far below the hundreds of thousands at the start of the year, and the unemployment rate ticked up to 4.3%. Despite headline inflation rising in August to 2.9%, the weakening employment market prompted the Federal Reserve to cut interest rates by 25 basis points in September.

The UK’s economic situation was more challenging. Quarterly Gross Domestic Product (GDP) growth was 0.3% in the three months to June, which was better than expected but still down from the previous quarter. Inflationary pressures continued to pick up. Headline inflation reached 3.8%, significantly above the Bank of England’s target. In August, the Bank cut interest rates to 4%, from 4.25%, a decision that was described by Governor, Andrew Bailey, as “finely balanced”.

In the eurozone, GDP growth also slowed. Inflation held steady at 2%, in line with the European Central Bank’s target. The bank kept interest rates unchanged during the third quarter at 2%. China’s economy expanded 5.2% year-on-year in the second quarter, while Japan recorded annual GDP growth of 1.2% in the same period.

Equities (or shares)

The UK stockmarket rose but returns trailed the global market. The FTSE 100 led with a 6.9% gain to end at a record high. The index benefited from a weaker pound, which increased the value of international firms’ overseas earnings. Small and mid-cap stocks were more modest, given their greater exposure to the domestic economy. Worries about persistent inflation, slowing economic growth, and the UK’s fiscal position limited gains.

US stockmarkets were positive as share prices continued to rebound from the tariff-induced sell-off in April. The gains were driven largely by ongoing enthusiasm for AI and technology. Investors also welcomed increased clarity around trade tariffs, while the first rate cut this year had a positive impact. These factors outweighed worries about inflation, the weakening jobs market and the fiscal position.

European equities reached record highs. Markets were supported by a trade deal between the European Union and the US and optimism about technology stocks. However, performance lagged global markets and other regions as worries about fiscal positions and political upheaval capped gains.

Japanese equities posted strong gains, buoyed by improved sentiment following the 15% tariff agreement with the US.

What do you mean by Equities?

• Equities are commonly known as "shares". When a fund buys a company share, it is investing in a company and, in exchange, receives a share of the ownership of that company. Shares give two potential investment benefits:
  
  
  • share prices may increase as the value of the company increases.
    
    
  • companies may pay dividends - regular payments made to shareholders based on how well the company is doing.

What are the general risks of this type of asset? 

• Over the longer-term (over 10 years), equities are considered to offer greater growth potential than many other asset types. However, the value of any investment can go down as well as up and so there is a higher risk of losing your original capital than investing in fixed interest securities (see below).

• The financial results of other companies and general stock market and economic conditions can all affect a company's share price, and consequently the value of any fund investing in that company.

Fixed interest

The price of UK government bonds (gilts) fell, underperforming both US treasuries and German bunds. The yield of the 10-year UK gilt rose to 4.7% from 4.4% at the start of the period.

The quarter was mixed for global government bonds with a strong divergence between the US and other developed markets. US treasuries rose 1.6%, US corporate bonds outperformed government counterparts, returning 2.6%. The relatively positive picture in the US contrasted with the declines by European, notably French, and UK government bonds as fiscal and growth concerns dominated the narrative.

European bonds struggled. Italian and Spanish government bonds were positive, while France and Germany fell in value. European corporate bonds were relatively resilient, rising 0.9% in the quarter. European high yield bonds returned 1.9%

What do you mean by Fixed Interest?

• Fixed interest securities, more commonly known as "bonds", are loans issued by companies or by governments in order to raise money.
  
  
• Bonds issued by companies are called Corporate Bonds, those issued by the UK government are often called Gilts or UK Government bonds and those issued by the US government are called Treasury Bonds.
  
  
• In effect, all bonds are IOUs that promise to pay you a sum on a specified date and pay a fixed rate of interest along the way.
  
  
• Index-linked securities are similar but the interest payments and redemption value are normally increased by a price index e.g. for UK government index-linked securities, interest payments and redemption value are increased in line with the UK Retail Price Index.

What are the general risks of this type of asset

• On the whole, investing in Government or Corporate Bonds is seen as lower-risk than investing in equities. To date, no UK government has ever failed to pay back money owed to investors. But with Corporate Bonds there is a risk that the company may not be able to repay its loan or that it may default on its interest payments.
  
  
• Corporate and Government bonds are sensitive to interest rate trends. An increase in interest rates is likely to reduce their value, and hence the value of any fund investing in them.

Property

For the three months to end-August 2025 (the latest date for which data is available), capital values for All UK commercial property increased by 0.5%, according to property consultant CBRE. This was a slight deceleration in the growth rate seen in the previous three months to May 2025, which was 0.8%. Including rental income, the total return over the three months to end-August was 1.9%. Over the three months, capital value growth was led by the industrial sector, but the retail sector also saw a meaningful growth in values. However, the office sector saw no capital growth in the three-month period. Capital growth slowed in all three sectors when compared to the previous three-month period. Rental values grew in all sectors over the three months to end-August, with growth strongest in industrials and offices.

What do you mean by Property?

• For our funds we would mean commercial property investment. This generally means the fund is sharing in the returns from the ownership of some buildings (for example, offices and shopping centres).
  
  
• The value of the property may increase and tenants may pay rent to the owners of the building.

What are the general risks of this type of asset

• Property can be difficult to buy and sell quickly. Fund managers may have to delay withdrawal of money by customers from a property fund until they can sell some of the buildings the fund invests in.
  
  
• The actual value of a property is what someone is prepared to pay for it - an actual sale value. As sales are infrequent, interim valuations are based on a valuer's opinion and may be revised up or down from time to time. This can affect the value of a fund invested in commercial property, with the value possibly fluctuating significantly and could result in an investor not getting back the amount they originally invested.
  
  
• This leads to a number of risks for funds investing in property:
  
  
  • Cash could remain uninvested as property assets can be difficult to buy, leading to lower returns than expected.
     
  • The value of the fund may be reduced if a large number of withdrawals are requested and it is necessary for properties to be sold at reduced prices.
    
    
  • There may be delays removing your money from the fund if property cannot be sold.
    
    
  • Property fund valuations may be revised periodically, upwards or downwards.
    
    
  • Rental income is not guaranteed. Defaulted rent and unoccupied properties could reduce returns.
    
    
  • If the size of the fund falls significantly, the fund may have to hold fewer properties, and this reduced diversification may lead to an increase in risk.